When a Sale Isn’t Really A Sale

A brick and mortar retail store closing isn’t exactly noteworthy these days, but the downtown Minneapolis Macy’s is a particularly special case.

For one, the store is big. Not just big – massive. This thing takes up (took up?) nearly an entire city block and towers 6 stories into the air.

The 1 million square foot store is so big it uses each floor as a separate category of merchandise. The entire first floor is reserved just for jewelry and accessories. Women’s clothing takes up the second. Men’s clothing sits on the third. Bedding, appliances, and much more round out the remaining floors.

I wouldn’t normally feel sympathy for the closing of a massive retail store, especially a high-end one. I don’t find the business of convincing broke people to buy overpriced junk they don’t need as particularly honorable. But this Macy’s was a special case.

For one, the building was a hallmark of the Twin Cities’ downtown. The store’s size alone made it so – Macy’s was the largest store in all of Minneapolis – but the building’s connection went further than those old brick walls.

Those brick walls dated back to the store’s opening in 1902. For 115 years and through two World Wars, the building transitioned between a Dayton’s to a Target to a Macy’s. The store not only sold to the residents of the Twin Cities, but it also frequently hosted awesome, free events for the community.

Every Spring, this location would convert an entire floor into a free and utterly breathtaking flower exhibit. The awesome little tradition lifted the spirits of the city after an undoubtedly long and brutal winter.

About 1/10th of the annual free flower exhibit.

In the summer, the department chain ran an annual fashion show. In the winter, they decorated a holiday display which could have popped right out of the movie set of your favorite Christmas Special.

Which is why I aaaalmost felt sorry for the closing store…. right until it tried to rip me off.

115 Years of Stuff For Sale

Upon hearing of the closing, I went to the old department store to say my goodbyes.

Oh, and I’d be lying if I didn’t admit I was intrigued by the prominently advertised “ENTIRE STORE: 50-70% OFF!!!” signs.

It was crazy in there. Giant red and white sales signs hanging over every corner, and a thick mountain of stickers pasted on each remaining item as the prices were marked further and further down.

I started at the top floor, also known as the completely random stuff floor.

I guess even businesses aren’t immune to accumulating stuff over time…

Macy’s had 115 years of junk to purge, so the selection was weird, to say the least. Ever wanted to own Santa’s chair? Maybe a deep fryer or panini press from the food court is more your style? And let’s not forget the mannequins.

My god… the manequins. All naked, some with nondescript bumps for private parts, others with far too much detail. Male mannequins, female mannequins, mannequins of just boobs and mannequins of just butts.

I decided I had enough of the top floor when I took a wrong turn and ended up in a room filled with jumbo sized canoes and life size puppets on strings.

When a Sale Isn’t Really A Sale

I descended lower, towards floors containing mostly junk not already picked over by the hordes of eager deal scorers. Still, there looked to be some great discounts here and there:

Precious stones half off.

$800 watches for $200.

And when I slid into the basement floor devoted entirely to kitchen appliances: a $480 All-Clad multi-pot for 50% off.

Now I’m a sucker for cool kitchen tools, so this immediately caught my attention. I love pretending like I’m an actual chef and whipping up the fanciest meal my amateur mind can conjure. Home cheffing flexes the creative muscle, it builds a very useful skill, and even splurging on ingredients is a lot cheaper than going out.

I received a fancy All-Clad Sauté Pan several years ago, and it remains one of my favorite possessions. All this to say, I did a serious double take at a normally $480 pot marked down to $240.

But I wasn’t familiar with the particular pot, so I took out my cell phone, waited for the basement’s 1 bar of service to sputter along, and typed up a quick google search, ready to laugh maniacally at the amazing deal I was about to score.

The first google result?

The same All-Clad pot: $199. And from Macys.com!!

Those snakes had taken a pot for sale on their own website, over-inflated the price, then hoped some over-excited deal seeker would pay an extra $40 just because of the fake “original” price!

I was so mad I went home without even getting some food court snacks, for old time’s sake.

The Anchoring Effect – The Sneakiest Tool in the Marketer’s Playbook

In the late 70s, Nobel Prize winning economist Daniel Kahneman and his partner Amos Tversky famously experimented with a wheel of fortune. The wheel ran from 0 to 100, but the two economists rigged the wheel so it would only stop at either 10 or 65.

Participants spun the wheel, then were asked to guess the percentage of African nations in the UN.

Average guess for spinners of the number 10? 25%

Average guess for spinners of the number 65? 45%!

This is what’s known as the anchoring effect – the bias of the human mind to allow completely irrelevant information to influence an unrelated value.

How powerful is the anchoring effect on what we’re willing to spend?

A psychology experiment at MIT held an auction to find out, with a strange twist.

The auction listed a bunch of random objects for sale to a group of marketing students. To prevent against consumer preferences, the auction included everything from books to keyboards to wine.

The twist? Before the start of the auction, the bidders had to write down the last two digits of their social security number on a piece of paper.

Like clockwork, the students with higher social security numbers paid more for all the items. A lot more.

For one cordless keyboard, people with higher social security numbers were willing to pay an average of almost four times as much!

Price paid from people with SS numbers from 00 to 19: $16.09

Price paid from people with SS numbers from 80 to 99: $55.64!

The results held true, in a perfectly correlated relationship all the way across each item. This table from Dan Ariely’s fabulous book, Predictably Irrational, shows the full results from the experiment:

Either people with high social security numbers really like mice, keyboards, chocolates, wine, and graphic design books, or us humans are easily influenced by some finicky factors outside our control.

Recognizing the Anchoring Effect, Everywhere

Once you notice the pattern, you start to see anchoring everywhere:

Infomercials claiming a “$100 value for only $19.99!!” is one of the oldest marketing tricks in the book.

The diamond industry’s recommendation to spend a certain month’s salary on an engagement ring is a classic case of anchoring. One man’s salary is a completely illogical reference point for a bride’s preference in jewelry, yet marketers use the number to anchor customers high.

The most influential factor in a home’s selling price is its asking price.

The last effect is particularly powerful. In one experiment, actual real estate agents visited a house to assess its value. Half the agents were given a booklet with an outrageously high asking price, and half were given a booklet with an outrageously low asking price.

Agents exposed to the higher asking price were willing to pay 41% more than the agents who saw the low asking price.

I had this exact experience when Hancock Fabrics went out of business. I always thought they were overpriced, but I figured the liquidation sale would be my chance to swoop in. Nope. Everything was either normal sale price or even ABOVE sale price. It was way too expensive, and I left without buying one thing. Y’all, make sure you’re skeptical of “sale” prices, especially during liquidations!

The study results are fascinating, though. The last two numbers in my SS # is in the top quartile. Am I screwed or what? It’s amazing how consistent those auction results were. The same with the “wheel of fortune” — completely unrelated numbers influencing another.

Lots of sellers on Amazon try to use the anchor strategy. Lots of goods at 80% off and it’s pretty easy to see through. But Macy’s should be above that, right?

You know I’ve read in the past that usually on those closeout sales they sell the inventory beforehand to a closeout company who maximizes it’s return. That’s probably why the price is higher then Macy’s.com, your not buying from Macy’s in effect. Pricing theory in marketing is a very real thing. Phones though mitigate lot of the risk, so long as you remember to check.

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I'm the Money Wizard, a 20-something who started this blog after I saved $100,000 by age 25. After watching most of my friends start down a quick path to financial destruction, I created the Money Wizard community to share everything I've learned so far and to interact with others interested in reaching financial wizardy.
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